Justin Ridl, MD, Cognia
The arrival of a new contract lifecycle management (CLM) system — or any legal tech solution — comes with potential pitfalls that can diminish its effectiveness or even stop you from getting full return from your investment. In the last article we talked about the new ISDA Create tool, which automates the process of contract repapering, simplifying reg reform by letting financial services firms bulk-update their derivatives contracts whenever a rule change demands it.
ISDA Create is designed to do one thing really well —that’s an advantage for those firms only looking for a derivatives documentation CLM solution. The trouble with point solutions in legal tech is that many of them can only be applied to a narrow set of tasks.
So, let’s call that tech pitfall number one: taking special care to interrogate the value of any solution that’s narrow in functionality. You’ll want to be sure it solves a problem so big that it’s worth the price tag — and the time it will take to implement it.
Because rolling out a new CLM solution in a banking environment is almost always technically daunting. It has to be integrated with credit systems, CRM systems, data repositories and document managements systems to name a few. The interfaces and APIs need to be pre-coded and ready to go, otherwise you can spend months creating workarounds.
Availability and shareability of data is the next challenge. In financial services and elsewhere, lots of organizations use multiple systems to create and manage contracts. That means some may be held in a central repository and accessible to the whole enterprise, while others are owned by different departments, geographies, or business units who might opt to store their contracts separately.
That creates a pitfall called data siloes. For a CLM system’s automation features to work, contracts need to be stored in one place, in a common data format, and be governed by the same IT rules about data quality and lineage.
Organisational issues can also rear their head if the rollout of a solution doesn’t take into account the needs of multiple users across the business. The process of contracting involves many stakeholders, all with different interests at different stages of the contracting lifecycle. That can create tensions which lawyers or contract managers typically have to resolve.
So, the CLM system you settle must accommodate credit, sales, compliance, risk, and legal, so all of them can match the system to their existing workflows. In our experience a no-code platform with ready-made automation functionality is often the best option. They can be customised for multiple users and automate legal and compliance processes with minimal input from IT.
In the next article we’ll delve deeper into organisational issues, and consider the benefits of a hybrid human-machine approach to using CLM, and the use of tech more generally in a modern legal team.
